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· September 20, 2012

Study can find no correlation between cutting taxes for the wealthy and a better economy

Last week the Congressional Research Service released a new report: Taxes and the Economy: An Economic
Analysis of the Top Tax Rates Since 1945. Chye-Ching Huang of the Center on Budget and Policy Priorities has taken a look and here are a few of her takeaways:

  • The report does not find a statistically significant correlation – going back to 1945 – between the top capital gains or top marginal tax rates and:
    • Economic growth
    • Private saving
    • Investment
    • Growth in labor productivity
  • The report does find a statistically significant correlation between cutting top tax rates and higher concentration of income at the top.

Trickle down just doesn’t work. Huang offers some caveats to go along with the CRS analysis and everyone else’s analysis of their work.

This caution also applies to the CRS report:  it’s not airtight statistical proof that cutting capital gains or income tax rates has no effect on growth, savings, investment, or productivity.  Other things happening in the economy might have obscured any such effects.  But there’s no evidence for some policymakers’ assertion that cutting marginal income tax and capital gains tax rates would have very large, positive effects on the economy.

You can read Huang’s entire post here.

Note on the Congressional Research Service: You’ll notice there is a link to the PDF of the original report from the CRS. Aren’t we lucky this time. You see, the CRS produces tons of unbiased, quality analysis of various and sundry topics of public policy interest to Americans, but the only Americans with free reign to the information are your 535 members of Congress and U.S. Senators. Someone was kind enough to liberate this report and it’s all over the Web. We shouldn’t have to play games or hope that some congressional staffer will “release” this good work which was paid for by our tax dollars. If you know what to ask for, your member of Congress would probably send you all the CRS reports you want, but then again, you would have to know what’s available. Wouldn’t it be wonderful if Congress would just allow CRS to publish an index of their research reports on the Web with PDF links to the reports? End of diatribe.

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